#USA #Dallas #NexPoint #UDF IV #Ready Capital

NexPoint Raises Alarm Over UDF IV and Ready Capital Merger

In a significant statement on March 3, 2025, NexPoint Real Estate Opportunities, LLC, alongside its affiliates, expressed urgent concerns regarding the ongoing merger proposal between United Development Funding IV (UDF IV) and Ready Capital. With the Special Meeting of UDF IV Shareholders scheduled for March 4, 2025, stakeholders are feeling the pressure to critically assess this potential union, particularly in light of recent financial disclosures from Ready Capital.

Context of the Concerns

NexPoint's concerns come on the heels of Ready Capital's disappointing fourth-quarter earnings results, which were released on February 28, 2025. The report showcased a dramatic drop in the company's stock price, plummeting over 25% when the market closed, with shares trading as low as $4.78. This decline directly correlates to a reduced value of $1.99 per UDF IV share under the proposed merger, a stark contrast to the previously implied value of $3.07 per UDF IV share prior to the earnings release. Overall, the value associated with the merger potentially could decrease by more than $30 million for UDF IV shareholders.

NexPoint's Proposal Rejected

Adding to their frustration, NexPoint revealed that the UDF IV Board of Trustees has outright rejected their competing proposal without making any effort to engage in a discussion to explore what might be a more beneficial transaction for the shareholders. This rejection was seen as hasty, especially given the new financial landscape presented by Ready Capital's earnings report.

NexPoint argues that, under these circumstances, it is imperative for the UDF IV Board to reconsider their stance on the merger with Ready Capital. They assert that abandoning the initial rejection of their proposal and postponing the Special Meeting by a month would provide time for the Board to re-evaluate the health and stability of Ready Capital.

Urging for Better Evaluation

The fiduciary duty of the Board is to prioritize the best interests of UDF IV shareholders, and that includes reassessing the implications of merging with a financially unstable partner. NexPoint has urged the UDF IV Board to reflect on their responsibilities and leader duties critically; they insist that further time for evaluation would enable a more thorough examination of potential alternatives and better serve the interests of all stakeholders involved.

With the potential for decreasing shareholder value, NexPoint believes that it submitted a superior transaction proposal initially, and that the Board's dismissal of their offer is not in alignment with acting in shareholder interests.

Conclusion and Next Steps

As the scheduled Special Meeting approaches, UDF IV shareholders must navigate these critical developments carefully. NexPoint emphasizes the importance of making an informed decision that could safeguard shareholder interests in what appears to be a precarious merger scenario. Stakeholders are encouraged to keep a close watch on further updates and discussions surrounding this notable transaction. Shareholders can also visit udfaccountability.com for ongoing updates and insights.

In summary, the unfolding events illustrate the fluid and uncertain nature of financial mergers and acquisitions, reminding us all of the importance of diligence in evaluating potential corporate unions. Stakeholders need to ensure a detailed examination of the involved parties' stability and future prospects, particularly in financially volatile situations.